With all eyes looking ahead to the UK’s EU referendum, and with so much resting on the outcome, trader sentiment has endured considerable shifts in recent weeks. Market volatility is expected to reach record-highs as the 23rd approaches.
With that in mind, the Pound Sterling to New Zealand Dollar (GBP/NZD) exchange rate is likely to see significant price-swings in the build-up to Thursday’s vote.
GBP Exchange Rate Forecast to Fluctuate on EU Referendum Uncertainty
Forecasting Sterling movement has become increasingly difficult with EU referendum uncertainty the principle driver of market changes.
Last week, the UK unit softened versus most of its major peers with the ‘Leave’ campaign gathering momentum and opinion polls pointing to a ‘Brexit’.
At the close of the week, however, Sterling recovered some ground as EU referendum campaigning was suspended following the horrific murder of Labour MP Jo Cox.
Campaigning resumed over the weekend and the latest set of opinion polls now paint a different picture.
Although the vote is almost certainly going to be close, opinion polls now show that ‘Remain’ will edge out a victory.
This caused the Pound to rally versus its peers, with the currency reaching fresh monthly highs against several of its rivals.
Domestic data is unlikely to feature this week, with market focus dominated by the impending vote.
With that said, the Bank of England’s (BoE) second additional ILTR operation to ensure UK banks can withstand the potential shock of a Brexit may be of interest.
New Zealand Dollar (NZD) Exchange Rate Predicted to See-Saw on Volatile Market Sentiment
Generally damp market sentiment last week caused the New Zealand Dollar to soften versus a number of its major peers.
The suspension of EU referendum campaigning in the UK did cause market sentiment to improve on Friday, however, which pushed the ‘Kiwi’ (NZD) higher.
On Monday of this week, the New Zealand Dollar advanced versus all of its major peers with the exception of the Pound.
The appreciation is once again in response to risk-on trade as reduced Brexit fears support demand for high-yielding assets.
Even disappointing domestic data, which saw consumer confidence decline in the second-quarter and services output reduce in May, wasn’t enough to prevent ‘Kiwi’ gains.
Domestic data is comparatively thin-on-the-ground this week, with May’s Credit Card Spending report the only domestic ecostats likely to cause movement.
Market sentiment is once again, therefore, likely to cause changes for the New Zealand Dollar. Any EU referendum developments will cause traders to be highly reactionary.
With that in mind, swings in market sentiment are predicted to cause significant NZD exchange rate volatility this week.
Over the past seven days, the GBP/NZD exchange rate was trending within the range of 2.0003 to 2.0596.